You have just had a tenant sign a lease contract that guarantees you payments of $100,000 at the end of each year for the next five years. If you wish to determine the present value of these future cash flows (i.e. the value of this cash flow stream to you today), you would use which of the following time value of money processes?
A) Compounding
B) Discounting
C) Amortizing
D) Aggregating

Question

Quizplus · Accepted Answer

To determine the present value of future cash flows, we need to discount the future cash flows back to their present value. This involves the process of discounting, which is the opposite of compounding. Amortizing refers to the process of paying off a loan with regular payments, and aggregating refers to combining or adding multiple items together.

You Have Just Had a Tenant Sign a Lease Contract